Murphy Oil Corporation (MUR) posted third quarter 2010 operating earnings of $1.05 per share, which dipped 5 cents from the Zacks Consensus Estimate of $1.10. However, the company’s results outpaced 98 cents reported in the year-ago quarter, driven by better-than-expected earnings from U.S. retail marketing and ethanol production operations.
Total Revenue
Total revenue during the quarter increased 17.3% to $6.1 billion from $5.2 billion in the year-ago quarter. The year-over-year growth in revenue was driven by improved performance at both the segments, Exploration and Production (E&P) and Refining and Marketing (R&M). Revenue, however, missed the Zacks Consensus Estimate of $6.2 billion.
E&P revenue increased 17.5% year over year to $887.6 million versus $755.6 million in the year-ago quarter. The improvement was due to higher oil and natural gas sales prices and higher natural gas sales volumes.
R&M revenue increased 17.0% year over year to $6.2 billion versus $5.3 billion in the year-ago quarter. The improvement issued from strong U.S. retail and marketing margins.
Operational Update
Murphy’s worldwide crude oil and natural gas liquids (NGL) production in the reported quarter was 119,899 barrels per day (Bbls/d), down 8.9% year over year. Quarterly liquids production declined mainly due to lower gross production at the Kikeh field, offshore Sabah, Malaysia. Average crude oil sales volumes were 122,574 Bbls/d in the third quarter compared with 128,187 Bbls/d in the year-ago period.
Natural gas sales volumes improved year over year resulting from ramp up of production at natural gas fields offshore Sarawak, Malaysia; and higher production at the Tupper area in Western Canada. Murphy sold 371 million cubic feet per day (MMcf/d) in the third quarter compared with 182 MMcf/d in the third quarter of 2009.
For liquids sold in the quarter, the company realized $65.45 per barrel compared with $61.13 last year, implying a growth of 7.1%. Realized price for natural gas volumes sold in North America averaged $4.24 per thousand cubic feet (Mcf), an increase of 40.9% from $3.01 in the year-ago quarter. Malaysian gas volumes from the Sarawak fields were sold at $5.71 per Mcf in the quarter compared with $3.31 in third quarter 2009.
Exploration expenses were $62.0 million in the third quarter of 2010 compared with $37.9 million in the same period of 2009. Higher exploration expenses resulted from increased undeveloped leasehold amortization expense associated with the Eagle Ford shale play in South Texas and recent leasehold acquisitions in Canada. Also contributing to the rise was increased 3D seismic costs offshore Republic of the Congo as well as costs associated with a dry hole offshore the United Kingdom.
Interest expenses of the company at the end of the quarter were $12.8 million versus $12.6 million at year-ago quarter end.
Financial Update
Total cash and cash equivalents as of September 30, 2010, were $462.4 million versus $315.1 million as of September 30, 2009.
Murphy spent $660.7 million on capital expenditure in the quarter, up from $595.2 million in the prior-year quarter. During the quarter, the company invested $553.9 million in the E&P segment, $105.4 million in the R&M segment and $1.4 million in the Corporate segment.
Guidance
Murphy expects total production in the fourth quarter of 2010 to average 198,000 barrels of oil equivalent (Boe/d) and sales volumes to average 188,000 Boe/d.
Murphy expects fourth quarter earnings in the range of 50 cents and $1.15 per share – a wide range due to a significant amount of exploration drilling in the three-month period. The earnings projection includes a contribution of approximately $23 million from the Refining and Marketing business and total exploration expense in a range of $50 million to $190 million.
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